An examination of single-transaction blocks and their effect on network throughput and block size

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An examination of single-transaction blocks and their effect on network throughput and block size

The Bitcoin network’s creation of normal blocks and single (coinbase-only) transaction blocks is analyzed using multiple empirical approaches. A maximum Bitcoin network transaction commitment throughput of 60KB/sec is derived. The significant role of single-transaction blocks in limiting this throughput is then shown. The miner revenue equation in an unlimited-block environment is derived, and it is shown that the optimum strategy for mining pools is to mine competing small blocks when presented with a block that is so large that its validation time will affect fee revenue. It is shown how this strategy naturally discourages large block sizes as a function of transaction throughput, coinbase reward and average transaction fees, and how is encourages larger blocks as fees increase, but in an asymptotic manner. In fact given today’s network metrics, typical transaction fees of 0.1 to 0.4 BTC/MB actually discourage block growth, and the optimum-profit block size will not exceed about 30MB regardless of fee spent. Therefore, the choice of block size is a de-facto hash-power weighted “vote” controlling average block size and can replace proposed schemes that use explicit voting and/or flexible capacity